Worries over another Bank of England rate rise in May have sparked a rush of inquiries about fixed-rate mortgages as borrowers rush to protect themselves from soaring rates. Around 85 per cent of recent applications via online mortgage company mform.co.uk have been for fixed rate deals and applications for fixed deals are 30% per cent higher than in the preceding month
The rush for fixed deals is forcing lenders to withdraw cut-price deals entirely or to put up rates which has cut the choice for borrowers. Nationwide Building Society, for instance, withdrew a 5-year fixed deal for members only on 23 April and introduced rate rises across other products from 24 April.
Other lenders including Alliance & Leicester have pulled their entire range while some such as Northern Rock have put products on withdrawal watch.
However mform.co.uk is urging customers to look out for fees when choosing a fixed-rate. Its analysis shows some of the cut-price deals currently available can come with high fees and anyone looking for low rates could be stung.
Francis Ghiloni, mform.co.uk marketing and business development director, said: “Moves in the money markets mean lenders are withdrawing mortgage deals so borrowers need to be rate smart if they want to get the best possible deal.
“That ought to mean focusing on the true cost of your deal and that must mean keeping an eye on fees as they take a substantial bite out of any savings you might make.”
Its analysis shows the 10 lowest initial rates for two-year fixed rates come with fees ranging between £499 and £999. Based on a £150,000 loan a £999 fee is more than one month’s repayments. Other fees go up to £1,499.
However once the true cost of a deal – including repayments and fees – is taken into account lenders with higher initial rates such as Stroud & Swindon’s 5.34 per cent two-year fix and Abbey’s 5.74 per cent two-year fix with no fees look more competitive.
